National Insurance

Building up your entitlement

You pay National Insurance contributions (NICs) to build up your entitlement to certain social security benefits, including the State Pension. The type and level of NIC you pay depends on how much you earn and whether you're employed or self employed. You stop paying NICs when you reach State Pension age.

You pay NICs if you are an employee or self-employed and you are aged 16 and over, providing your earnings are more than a certain level. You stop paying NICs at State Retirement age. This is currently 65 for men and 60 for women but will gradually increase to 65 for women over the period 2010 to 2020.

Your National Insurance number (NI number) is your own personal account number. The number ensures that the National Insurance contributions and the tax you pay are properly recorded on your account. It also acts as a reference number for the whole social security system.

The only people you should ever give your NI number to are:
HM Revenue & Customs (HMRC)
your employer

Jobcentre Plus, if you claim Jobseeker's Allowance
your local council, if you claim Housing Benefit
Entitlement to many benefits depends on your National Insurance contribution record (see 'Benefits that depend on NICs' below) so it's very important not to give your number to anyone else.

You will also be required to provide your NI number if you open an Individual Savings Account (ISA).

If you don't already have a NI number you must apply for one:
as soon as you start work
as soon as you or your partner claims benefit

To be able to apply you must be:
over 16 years of age
resident in Great Britain (England, Wales or Scotland)

If you are a parent or guardian and receiving Child Benefit, any children you care for will automatically get a card showing their NI number just before they reach the age of 16.

National Insurance Rates

The following amounts apply for the 2008/09 tax year:

If you're employed

if you earn above £105 a week (the 'earnings threshold') and up to £770 per week you pay 11 per cent of this amount as 'Class 1' NICs
you also pay one per cent of earnings above £770 a week as Class 1 NICs
you will pay a lower amount as an employee if you are a member of your employer's contracted out pension scheme

If you're self-employed

you pay 'Class 2' NICs at a flat rate weekly amount of £2.30
you also pay 'Class 4' NICs as a percentage of your taxable profits - you pay eight per cent on annual taxable profits between £5,435 and £40,040 and one per cent on any taxable profit over that amount
if your earnings in the 2008-2009 tax year are expected to be less than £4,825 then you may be entitled to the Small Earnings Exception (SEE), meaning you don't have to pay any Class 2 NICs - you can apply for SEE for the 2008-2009 tax year on form CF10